Student Loans in Oklahoma Bankruptcy

Student loans in Oklahoma bankruptcy are one of the most frustrating aspects of modern life. In order to obtain the education you need for the career you want, you have to take on debt. Sadly, that doesn’t always work out. Employment fluctuates, life intervenes, and student loans go from being an annoyance to a full blown crisis. As bankruptcy attorneys, we see this all the time. Unfortunately, the ability to discharge student loans is greatly limited, unless you’re fully disabled. But, just because bankruptcy doesn’t forgive the student loan itself doesn’t mean bankruptcy wont help you better afford the payment.

How Bankruptcy Can Help with Student Loans

While most unsecured debts can be forgiven in bankruptcy, federal law sets aside certain types of debts that cannot be forgiven. These include things you might expect like certain past due taxes or fines from a court case. In addition they include past due child support and, sorry to say, student loans. As of 2005, this rule not only applies to loans provided by the federal government, but any student loan issued by a private entity, or even a non-profit that receives government funding. The only real exception to this is for people who are totally disabled. Their circumstances are such that the courts consider repayment of student loans a hardship.

Benefits to Bankruptcy to Student Loan Debt

Bankruptcy can still help you get your arms around student loan debt. There’s several benefits in regard to student loans in bankruptcy. First, by filing a Chapter 7 bankruptcy, you eliminate most of your other debt. Money you spend on credit card bills or hospital bills can now go toward student loans. Reducing the number of things you have to pay can simplify your financial life. Second, filing bankruptcy offers a reprieve from student loan payment during the bankruptcy process. This is because of the automatic stay. The stay means that no creditors, student loans included, can try to collect money from you during the bankruptcy.

Chapter 13 Filing and Student Loan Debt

In a Chapter 13, a number of different things can happen with student loans in Oklahoma bankruptcy. If the loans are small enough, they may be paid off in their entirety through the Chapter 13 plan. If they’re too large to pay off, they’re categorized as “long term priority debt”. As a priority debt the student loan debt payment must made before other non priority debts get paid. In a chapter 13 the student loan debt might actually reduce the amount of unsecured non priority debt you’re forced to pay back through the chapter 13 plan. This is because the amount of your plan payment is determined by your disposable income. Disposable income is what’s left over after your living expenses are paid together with certain other priority debts.

More bankruptcy information – Debts forgiven in bankruptcy